[Click eStock] "Handok Cleantech, Positive Outlook as Overseas Sales of Client Water Purifiers Recover"

Korea Investment & Securities Report

[Asia Economy Reporter Minji Lee] On the 9th, Korea Investment & Securities released an analysis on Handok Cleantec, expecting an increase in sales due to the recovery of overseas sales of water purifiers from major clients such as LG Electronics, Samsung Electronics, and Coway.

Handok Cleantec is a specialized company in water purifier filters. It has production capacity capable of handling more than half of the filter demand from major domestic water purifier companies. Its main product is the carbon block filter, which is essential regardless of the type of water purifier. The carbon block filter adsorbs and removes chlorine, odors, heavy metals, and organic compounds in water.

Based on 30 years of know-how and automated production capabilities, Handok Cleantec has secured most water purifier manufacturers as clients, including LG Electronics, Cuckoo Homesys, Coway, and Samsung Electronics. Utilizing its carbon block filter manufacturing technology, the company has entered the air filter market, which currently accounts for about 1% of sales as of the first quarter of this year. Myungjoo Kim, a researcher at Korea Investment & Securities, evaluated, “Although the sales proportion is small, air filters have many applicable business areas such as automobiles and air conditioners compared to water purifier filters, making it a new growth engine for the company.”

This year, full-scale replacement demand for bespoke water purifier filters will arise. Filters used in LG Electronics and Samsung Electronics products are high-priced composite filters and finished product-type filters. Due to LG Electronics’ factory relocation last year, there was a temporary sales gap in carbon block filters for LG Electronics, but sales have been normal since the first quarter of this year. Last year, due to COVID-19, the client companies’ sales in Southeast Asia declined, significantly reducing Handok Cleantec’s indirect and direct export performance. Researcher Kim explained, “With the endemic phase, the overseas business expansion of client companies is accelerating,” adding, “The recovery of overseas sales of client companies will lead to increased sales for Handok Cleantec, the number one water purifier filter company.”

Despite sales growth in the first quarter, profit margins were damaged due to the sharp rise in raw material prices such as activated carbon and binders. Handok Cleantec plans to raise prices in the second half of the year, and factory operating rates are expected to recover with the recovery of demand in the upstream industry. Based on this year’s market expectations, the price-to-earnings ratio (PER) is about 16.4 times, lower than last year during the COVID-19 period, making its valuation more attractive. Researcher Kim stated, “When the client companies’ overseas sales fully recover with the endemic, Handok Cleantec will also record favorable performance.”